Video Conference Use Soars Along with Travel Costs

Airlines' pain is video conferencing's gain.

As companies slash travel budgets in the face of higher travel costs and a softer economy, they're increasingly adopting technology that enables employees to collaborate face-to-face without boarding a plane.

As the cost of business travel keeps rising, companies are looking for more ways to cut costs.

The businesses that make such technology, such as Polycom , Cisco Systems and Hewlett-Packard , are seeing profits from video conferencing soar alongside the price of jet fuel and gasoline.

With oil prices hitting an all-time high of $135.09 per barrel in May, Cisco has been hearing customers talk more about using video conferencing to avoid travel, said Erica Schroeder, who heads marketing for Cisco's video conference product, TelePresence.

"Travel is the topic of conversation from customers to us,'' said Polycom Chief Financial Officer Michael Kourey. "We're not having to pitch this.''

As part of an effort to cut travel costs by 10 percent, staffing services company Manpower has ramped up use of its video conference equipment in the last couple of months, said Allan McKisson, a vice president of human resources at Manpower.

"It used to be, when you can video conference, do it. Now it's do video conference first, or maybe don't have the meeting,'' said McKisson, who must approve his direct reports' travel requests.

In companywide e-mails, office furniture maker Herman Miller has encouraged employees to use video conferencing in addition to conference calls and car-pooling to cut operating costs, spokeswoman Susan Koole said.

"Herman Miller is really encouraging its employees to ask if their travel is truly necessary,'' Koole said.

High Anxiety

This anxiety over oil prices has translated into improved results for video conference equipment makers.

Sales of Polycom's high-end technology, which aims to make international colleagues feel like they're in the same room, grew about 58 percent between the fourth quarter of 2007 and the first quarter of 2008, Kourey said.

Cisco spokeswoman Jacqueline Pigliucci said the company's advanced video conference technology is the fastest-growing technology ever at the company, which is known as the largest U.S. maker of routers and switches that direct Web traffic.

Hewlett-Packard attributes some acceleration in sales to energy prices, said Ken Crangle, who manages the company's HP Halo videoconference technology unit. "Most of our customers come back to us pretty quickly and say: 'We justified this on the cost savings.'''

Repeat business happens because videoconferencing boosts productivity by cutting travel time and making more frequent, focused meetings possible, Crangle added.

But not every meeting can happen remotely, Manpower's McKisson said.

"Sometimes if it's a first meeting with people, you just have to meet face-to-face,'' McKisson said. "Nothing can replace that.''

Also, despite advances in technology, the industry as a whole has not reached its ultimate goal, which would be a video conference that's as easy as a phone call, said Nora Freedman, a senior analyst with technology market research firm IDC.

Such ease of use is already a reality when the parties involved use one system; but different video conferencing systems can't communicate with each other yet, and that's still two to three years away, Freedman said.

Money Saved

Reducing travel for intracompany meetings can yield substantial savings.

One Polycom client, News Corp subsidiary EasyNet, found that video conferencing had enabled it to cut travel spending by 35 percent after it compared the three months before and the three months after its introduction, said Mike Ayres, an EasyNet business development director.

Cisco has saved about $150 million on travel by using its technology to conduct meetings in the past year and a half, Schroeder said. The company is aiming to cut air travel by 20 percent.

But for customers who must buy the equipment, such savings don't come cheap. News Corp has sprung for some of Polycom's priciest systems, which cost between $299,000 and $700,000.

They feature life-sized screens, surround sound and operators—so tech-challenged executives don't need to even flip a switch. Less expensive alternatives cost between $30,000 and $45,000 and desktop systems start at about $10,000.

Accounting firm Deloitte, which has also bought Polycom's high-end product, has found that the quality of the latest systems induces employees to actually use them, said Larry Quinlan, the firm's chief information officer.

"People say it's lifelike; it's almost like being there,'' he said. "The clarity of the high-definition image is like watching football at home.''

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